The promise of cellulosic biofuels sounds like a fable out of the Brothers Grimm: turning straw into liquid gold. Or rather, switchgrass into gasoline. It’s not magic. The process has been around since the early 1800s, when the chemist Henri Braconnot figured out how to strip sugars from cellulose—the basic building block of all plant life—and refine them into a crude form of ethanol.
For almost 200 years cellulosic ethanol has had the potential to be one of the world’s greenest fuels. Unlike corn ethanol, cellulosic doesn’t rely on food crops. It can be made from corn stover (leaves and stalks), switchgrass, miscanthus, bagasse (sugar cane refuse), wood, even municipal waste. But each of these feedstocks presents its own technical and environmental challenges.
The trick is to make the ethanol sustainably, in bulk, and at a price that competes with crude oil. Cellulosic refineries enjoyed a brief heyday in the early 1900s—Henry Ford’s first models could run on pure ethanol—but were driven out of business by cheap petroleum. Years ago, I spoke with a cellulosic researcher during a visit to the National Renewable Energy Laboratory in Golden, Colorado. “The science works,” he told me. “The problem is economics.” Nobody could figure out how to produce it cheaply enough to turn a profit. So for nearly a century, cellulosic sat on the shelf.
The landscape changed in the mid-2000s. Faced with two wars and a spike in fuel prices, Congress and the Bush administration called for a radical increase in American biofuel production. The Renewable Fuel Standard (RFS), adopted in 2005, mandated a near doubling of the amount of biofuel blended into the nation’s fuel supply by 2012. It didn’t promise to break our addiction to foreign oil, but it was a first step.
That mandate led to an explosion of corn ethanol production. In early 2005, 81 ethanol refineries were producing 3.6 billion gallons per year. By 2007 an RFS-driven boom had contractors building 76 new plants capable of putting out an additional 5.6 billion gallons. So much corn was diverted into ethanol that a food-versus-fuel scare began rocking commodities markets. From 2005 to the middle of 2008 the world price for corn and soybeans more than doubled, causing food shortages and riots in many parts of Asia, Africa, and Latin America. Speculators fleeing the failing mortgage-backed securities market started putting huge bets on crop futures, further driving up commodities prices.
Enter cellulosic biofuels. Long championed by environmentalists, they suddenly found support even among America’s most strident oilmen. Republican James Inhofe of Oklahoma, the Senate’s leading climate change denier, hailed cellulosic as “a promising technology that could significantly increase fuel supplies” without hurting food prices.
With that kind of bipartisan support, Congress revised the renewable fuel standard in 2007 to include cellulosic biofuels. The target numbers—100 million gallons of cellulosic by 2010, 500 million by 2012—were ambitious, especially considering that not a single commercial-scale cellulosic refinery had ever been built in the United States. Not to worry, said cellulosic industry officials. They assured the Environmental Protection Agency, which administers the RFS, that refineries under construction would start producing millions of gallons within a couple of years.
Five years later, cellulosic refineries had produced just 20,069 gallons of fuel. Faced with high construction costs and interminable technical delays, many start-ups failed before producing a single drop. There were also some notorious frauds, such as Cello Energy. The EPA anticipated that Cello would produce 70 million gallons a year by 2010. Agency officials seemed to believe in the company. (And why not? CEO Jack Boykin was the former head of the Alabama Ethics Commission.) But after a judge found him guilty in 2009 of “oppression, fraud, wantonness, or malice” in his business dealings, Cello folded and took 70 percent of the nation’s hoped-for 2010 cellulosic fuel production with it.
When it comes to hope, mystery, controversy, and drama, no green energy sector can match cellulosic biofuels.
It looked like a classic case of overpromise and underdeliver. “Congress set those RFS targets without actually discussing with the technical community what would be possible,” says Robert Brown, director of Iowa State University’s Bioeconomy Institute. “The growth curves set for cellulosic fuels were impossible.” No other clean-energy technology faced such a steep scale-up curve. Wind and solar power, geothermal, and corn ethanol required decades to reach the production levels we see today. Cellulosic companies were asked to do it in four years.
When they failed to hit their mark, vultures circled the industry. In late 2011 a Wall Street Journal editorial branded it “The Cellulosic Ethanol Debacle.” Two early cellulosic companies, Calysta and Coskata, switched to making gasoline from natural gas. BP and Shell abandoned their cellulosic projects. Congress began reconsidering the value of the RFS, using the unmet cellulosic targets as Exhibit A. Stock prices of cellulosic companies tanked. Investment capital fled.
But then a funny thing happened: in early 2013, cellulosic ethanol refineries finally began producing biofuel. Texas-based KiOR, the nation’s leading independent cellulosic company, began shipping cellulosic diesel and gasoline from its refinery in Columbus, Mississippi. INEOS Bio’s Florida refinery began producing cellulosic ethanol from yard and wood waste in early summer. By 2014 the Spanish energy giant Abengoa, the chemical conglomerate DuPont, the ethanol maker Poet, and five other cellulosic refiners are expected to begin producing next-generation biofuel.
That production comes none too soon. Cellulosic refineries are expensive to build. A commercial-scale plant (producing about 20 million gallons a year) can cost $100 million to $200 million. Months of testing and tweaking are required before full production starts. The burn rate at cellulosic start-ups can be astronomical. Prior to its first fuel shipments this year, KiOR went through roughly $10 million a month on R&D; revenues were about $1,000 a day.
After six years of struggle, the cellulosic biofuel industry is finally taking its first steps toward self-sufficiency. “The good news,” Advanced Ethanol Council executive director Brooke Coleman told me, “is that in 2013 we’re expecting our production number for the first time to not be zero.”
If Coleman’s quote seems a little cockeyed, then you haven’t spent much time in the cellulosic biofuel space. When it comes to hope, mystery, controversy, and drama, no green energy sector can match it. Over the past six years, the industry has seen IPO jackpots and shocking failures, breakthrough discoveries and maddening delays. Some early believers have lost the faith in cellulosic. Others have found hope in the ability of cellulosic refineries to produce not just ethanol but also gasoline, diesel, jet fuel, and bio-based industrial chemicals, opening up new markets that might include the U.S. military, the global airline industry, and chemical manufacturers.
“Is cellulosic still worth it?” asks Mackinnon Lawrence, a renewable energy analyst and consultant for Navigant Research, in Colorado. “How much money do you throw at cellulosic to commercialize it? What’s its purpose now?”
These are fair questions. In a world of limited resources, it doesn’t make sense to pour money into failed technologies. It’s tough to know how the cellulosic story will end, or whether the grand ambitions of 2007 will ever be realized. Yet it’s clear that predictions of cellulosic’s demise have proved to be premature.
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To get a sense of where things stand, I waded into the Advanced Biofuels Leadership Conference earlier this year in Washington, D.C. The biannual meeting of scientists, entrepreneurs, CEOs, chemists, fuel buyers, and feedstock sellers offers a candid look at the state of the industry. In 2013, the most accurate description of that state would be roiling.
By the second day of the conference, the ballroom of the Gaylord Hotel and Convention Center had taken on the atmosphere of speed dating. Dozens of engineers and entrepreneurs were looking to hook up. Lufthansa jet fuel buyers sized up cellulosic biofuel refiners. A Georgia-Pacific salesman sought customers for his company’s vast holdings of southern pine. Venture capitalists heard wooing pitches from biofuel makers who were long on patents and short on cash.
At the microphone, conference host Jim Lane played matchmaker. “If you aren’t meeting the people you need to meet,” said the Biofuels Digest editor and publisher, “check with me and I’ll make the connection.”
The corporate mating dance was occasioned by a fact of life in the advanced biofuel world: money is still tight. Having sunk a big chunk of their capital into refinery construction, a number of companies are now trying to meet payroll by hook or by crook until they can start producing fuel and bringing in revenue. Finding new investors has become a survival skill. Between sessions, Lane hustled to the mike to announce the latest matches. “Brazil’s GranBio just took a 25 percent equity stake in American Process!” he cried, raising a smattering of applause.
The conference swung between celebratory toasts and sobering reassessments. “When I started 20 years ago, this was just an idea,” Valerie Sarisky-Reed, acting director of the U.S. Department of Energy’s Bioenergy Technologies Office, told the conference. “Now we’re seeing it actually happen.”
Later that day, Bob Walsh, chief commercial officer for the small cellulosic start-up ZeaChem, cheerfully described his company’s money troubles as “a speed bump,” but it was hard not to see him as a dead man walking. In March, ZeaChem’s wood-to-ethanol refinery in Boardman, Oregon, produced its first batch of fuel. CEO Jim Imbler hailed this milestone and looked forward to more success “as we ramp up to full capacity.” But ZeaChem’s production came too late. Just as its spigot opened, the company ran out of cash. Imbler and his team scrambled to find a bridge loan to keep it alive. When no loan came through, ZeaChem scaled back operations and laid off workers. The Boardman refinery has been mothballed since March.
What’s going on? The short answer is this: turning wood or grass into fuel on a commercial scale is really hard to do. “Getting to scale” is industry-speak for the process of moving from a small research lab putting out fuel in 100-gallon batches to an industrial-size refinery producing 10 million to 40 million gallons. When chemical or pharmaceutical manufacturers scale up, they commonly do so by orders of 10 or 100, expressed as 10x or 100x. With the RFS, Congress asked the cellulosic industry to scale up on the order of 10,000x in five years.
“In a lab, you’re working with perfectly clean wood chips,” explains Renata Bura of the University of Washington’s biofuels and bioproducts laboratory. “It’s almost never that pristine in a real-world refinery. At a commercial-scale facility, you’ll have needles, bark, and branches” polluting the mix.
At the biofuels conference, I asked Peter Williams, CEO of INEOS Bio, why it was taking so long to produce fuel at his company’s refinery in Vero Beach, Florida. “It took us four years to build it,” Williams told me. “Now we’re figuring out how to drive the machine.”
A number of problems typically come up in cellulosic facilities. Mixing enzymes evenly through the feedstock can be easy in a one-gallon container. It’s a different thing entirely in an industrial-size tank. Acids used in the process can corrode pipes. No matter how diverse the solids that go into the system—and with municipal waste, it’s a grab bag, containing everything from rotten food to plastic bags—the fuel produced has to be uniform in quality. For INEOS, attention to detail paid off: in late July the company announced that it was about to start shipping fuel. “Getting those feedstock handling issues dead right—you can’t underestimate how much time that takes,” said Williams.
The companies that survive long enough to produce fuel may be the ones wealthy enough to give their chemists and engineers the time they need to work the bugs out of a technically demanding process. Of the four companies at or near commercial-scale production, three are sustained by deep-pocketed parents with revenue streams in other industries. What that money buys is time. Abengoa’s cellulosic plant in Hugoton, Kansas, a small town just north of the Oklahoma panhandle, is the company’s first commercial-scale biorefinery. “Frankly, we’ve been working on this process for 10 years,” said Chris Standlee, executive vice president of Abengoa Bioenergy, the company’s renewable fuel subsidiary. Abengoa started with “lab and pilot scale” facilities in Spain in 2003, he said, and the company has been working steadily on scaling up to larger plants ever since.
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The curious thing about cellulosic biofuel is that even when production was zero, demand for the stuff continued to climb. It wasn’t all driven by the RFS mandate. Over the past few years, a number of companies and industries have set carbon reduction goals. It’s easy to become cynical about these announcements. But when they’re taken seriously they move markets—and provide critical demand for emerging green-fuel industries.
The American military is a huge future buyer. The U.S. Navy has announced that it wants to source half its non-nuclear fuel from renewables by 2020. That’s an ambitious goal, and the Navy is aggressively encouraging American biorefiners to build the plants necessary to produce upward of three billion gallons per year. Because the military is leery of the food-versus-fuel controversy, Navy fuel buyers are especially interested in advanced biofuels.
Pleasanton, California–based Fulcrum BioEnergy, which converts municipal solid waste into biofuel, has already signed development deals with both the Air Force and the Navy. Like most refiners, though, Fulcrum has yet to produce fuel: its Reno, Nevada, waste-to-fuel facility is still under construction.
The curious thing about cellulosic biofuel is that even when production was zero, demand for the stuff continued to climb.
Commercial airlines want cellulosic too. When officials from United, British Air, Lufthansa, and Qantas appeared before the advanced biofuels conference in Washington, the ballroom positively buzzed. The airline industry has a goal of becoming carbon neutral by 2020, and major carriers want cellulosic to be a big part of the fuel mix.
That market is massive. Worldwide, commercial airlines spend more than $200 billion a year on jet fuel, $50 billion in the United States alone. Airlines see carbon reduction as a key to their growth, because conventional fuels are expected to rise in cost as they become subject to carbon taxes and regulatory systems outside the United States.
“We expect to buy 100 million tons of biofuel by the year 2050,” Jonathan Counsell, head of environment for British Airways, told the conference.
No company is seeking biofuels more urgently than Qantas. Australia’s carbon tax has the airline paying more than $20 per emitted ton of carbon, so bringing more biofuel into their fuel mix isn’t merely a future concern. It’s a bottom line issue right now. And Australian companies are especially keen to find nonfood biofuels in light of the decade-long drought the continent suffered in the 2000s.
Another emerging market might prove nearly as valuable as marine diesel and aviation gas: renewable chemicals. The same process that turns switchgrass into ethanol can be tweaked to produce industrial chemicals such as BDO (1,4-butanediol) and butadiene, used in running shoes, cosmetics, tires, and other products. Earlier this year the German company BASF, the world’s largest chemical maker, signed a deal with San Diego–based Genomatica to produce renewable BDO using cellulosic technology. For BASF cellulosic chemicals could provide value at both ends of the factory: relief from the fluctuations of global petroleum prices and extra benefit to buyers. In competitive markets such as cosmetics and running shoes, bio-based ingredients could be the next wave of “organic” products.
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Attending an advanced biofuels conference can feel like wandering into a religious conclave. Everyone there shares a belief in the moral righteousness of biofuels. Most of them believe there’s a financial payoff down the road too. But under that umbrella of agreement there are debates about the correct path to enlightenment—or rather, financial sustainability. The cellulosic companies that continue to survive seem to have a couple of things in common. In addition to giving their engineers plenty of time, they’ve capitalized on small advantages in areas like refinery siting, feedstock storage, and customer development.
Some are working a piggyback strategy. Kansas-based ICM has developed bolt-on cellulosic refineries that work with existing ethanol plants to create a kind of whole-corn production line. The kernels go in the ethanol side; the rest of the plant goes to the cellulosic side.
KiOR, which produces gasoline and diesel from southern yellow pine, is trying a different approach. Wood, corn, grass, and wheat are so heavy and costly to transport that a cellulosic operation must source its feedstock within a 30- to 50-mile radius of the refinery. KiOR sees former pulp and paper mill towns as great refinery hosts. “The wood is there, the harvest infrastructure is there, and so are people familiar with handling the feedstock,” chief executive Fred Cannon said.
But the use of wood raises an uneasy question: If cellulosic really took off, would natural forests be chipped into ethanol? That’s a real concern for environmental groups like the Dogwood Alliance, which works on forest issues in the Southeast and is partnering with NRDC on its Forests Aren’t Fuels campaign (see “Forest Alert,” p. 61). “The cellulosic ethanol market could provide an incentive for landowners to clear-cut their forests,” said the alliance’s Thomas Llewellyn. Finding a buyer for single-species tree plantations could exacerbate the conversion of natural forests into row crops. “A thousand acres of plantation pine isn’t the same as a biodiverse forest,” Llewellyn said.
Abengoa Bioenergy’s small-scale cellulosic refinery in Kansas has been operating for the past four years. “There’s a lot of corn, wheat, milo, and prairie grasses grown in this region,” said Chris Standlee. “With multiple feedstocks, we’ve got different harvests at different times of the year,” which gives Abengoa a kind of manufacturing-on-demand model that cuts down on storage costs.
Abengoa’s next-generation refinery, a 25-million-gallon facility, is expected to produce fuel by early 2014. For Abengoa, the luxuries of time and patience have been critical. Many competitors tried the 10,000x scale-up and failed. Abengoa’s scale-up is only 16x. Because the fate of the company wasn’t riding on their shoulders, the engineers in Hugoton could spend years tinkering with the technology at the 1.5-million-gallon plant. “We’ve been operating for thousands of hours for the past four years,” Standlee said. That experience has proved invaluable in designing a larger plant that they believe will actually work.
In Southern California, meanwhile, the cellulosic start-up Cool Planet has attracted a stable of high-profile funding partners (including Google Ventures, GE, and ConocoPhillips) by turning the scale-up problem on its head. “We’re going small,” Cool Planet CEO Howard Janzen told the biofuels conference. “Instead of one large $350 million facility, we’re building a large number of small $20- to $50-million facilities.”
Cool Planet’s refining process converts wood, miscanthus grass, and other feedstocks into biofuels and a charcoal-like substance called biochar, which captures carbon and can be returned to the soil. According to Janzen, by removing carbon (through the growth of biomass) and sequestering it as biochar, the company’s process isn’t just carbon neutral—it’s carbon negative.
“Here’s a picture of our prototype refinery in Southern California,” he said. On the screen appeared a photo of a refinery the size of four shipping containers. I know that’s the size of it because the entire refinery was built inside four actual shipping containers.
A few weeks after the conference, I had a chance to drop by the Cool Planet refinery, which sits in the middle of a strawberry field in Camarillo, about 50 miles northwest of Los Angeles. “Our first commercial plant doesn’t have to be perfect,” Janzen told me. “It won’t cost that much. We’ll build it and then keep improving as we build more. When you have a new technology and you try to scale it up too quickly, people have problems executing.”
Six years is fast for a complicated process like fuel refining, but an eternity in political time.
Mike Bukowski, Cool Planet’s operations chief, took me to the control room, where four systems operators monitored a dozen computer screens. “We’re doing test runs this week to confirm capacities,” he said. “We have the fractionator—which breaks the miscanthus grass feedstock into its component parts—in the first container, then we convert it into gasoline and biochar in the second container.”
“Where does the fuel come out?” I asked.
Bukowski led me to the back of the refinery. “That’s it,” he said, pointing to a metal container the size of a household propane tank.
If the commercial-scale refineries coming online from KiOR and Abengoa represent the next generation of biofuel, Howard Janzen believes Cool Planet’s radically small concept could be the next-next. But to survive, Cool Planet will need to find special advantages and give its engineers time to work the bugs out. If it can do that, it has a shot—although it’s still a long shot.
As he showed me around the four-container refinery, Bukowski struck me as one of the cellulosic industry’s lesser-known but most valuable commodities: the old-school refinery engineer with environmental motivations and a thirst for innovation. A few years ago Bukowski was running a 9.5-million-gallon-a-day petroleum refinery for Sunoco near Philadelphia. “Cool Planet’s technology was maybe 50 percent of what attracted me” enough to move across the country, he told me. “We’re making gasoline that’s identical to the fuel going into automobiles right now. You’re going to have a lot more success if you offer a renewable fuel to consumers in a way that doesn’t ask them to switch to something they’re unfamiliar with. If you can do that, you can really make a difference environmentally.”
Bukowski and other cellulosic producers will need to start making that difference quickly. They’ve gone from labs to commercial-scale refineries in six years. That’s fast for a complicated process like fuel refining, but an eternity in political time. The U.S. shale oil boom, driven by the hugely controversial practice of fracking, has dramatically increased local fossil fuel production. American wells are producing 28 percent more crude oil and 21 percent more natural gas than they did in 2007. That, along with the recession, changed the political landscape. Senator James Inhofe isn’t praising the promise of cellulosic anymore; now he’s leading the congressional charge to repeal the entire RFS. But if cellulosic refineries can keep increasing the flow of biofuel into the nation’s fuel supply, they may be able to stave off the attacks long enough to stand on their own two feet.
On my way out the door of Cool Planet’s Camarillo refinery, Mike Bukowski acknowledged the hard truth his industry is facing. Green fuel is wonderful, he said, “but it doesn’t do anybody any good if the company producing it can’t stay in business.” It’s a simple formula: make fuel, make money, change the world.
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